China Development Bank Pulls Back From Commercial Push

Bank Keeps Low Profile After Financing Some of Asia's Biggest Deals

HONG KONG—China Development Bank Corp., the government-owned policy bank, made waves last year lending billions of dollars to private companies ranging from Alibaba Group Holding Ltd. to
Hong Kong Exchanges & Clearing
Ltd.

But the bank has been noticeably absent from big deals this year, after a high-profile flap in January when it tried to fund the sale of a stake in insurer
Ping An Insurance (Group)
Co.
of China.

Last year, investment bankers around the region said they often lost out to CDB, which could either afford to charge lower interest rates or could lend a huge amount of money. But in 2013, CDB has kept its profile low.

CDB declined to comment.

The bank began its life more than two decades ago as one of three policy lenders that provided funds to state firms whose actions were aligned with government policy. A 10-year, $10 billion loan to Brazilian state-run oil giant
Petroleo Brasileiro
SA
in exchange for 150,000 barrels of crude oil a day sent to China was a typical type of overseas loan. In funding acquisitions, a loan to
Aluminum Corp. of China
to finance its 2009 purchase of a 9% stake in Rio Tinto was another not-unusual deal for the bank.

In the summer of last year, CDB's commercial aspirations drew notice when the bank lent Alibaba $2 billion that the e-commerce firm used to buy out its Hong Kong-listed trading unit and to buy part of Yahoo Inc.'s stake in the firm. Months later, CDB funded most of the $2.2 billion that the Hong Kong stock exchange paid for the London Metal Exchange.

But by January, CDB's short-lived role as lender for Thai billionaire Dhanin Chearavanont's $9.39 billion acquisition of a stake in Chinese insurer Ping An Insurance became the last of these kind of deals.

HSBC
said in December that CDB would fund the sale of its stake in Ping An to Charoen Pokphand Group, which is controlled by Mr. Dhanin. But senior CDB officials grew skeptical about the transaction, people familiar with the matter said at the time, amid media reports that Mr. Dhanin, a businessman who made his fortune selling frozen chickens, wasn't the ultimate buyer of the stake in the giant life insurer. The media reports proved false, but CDB ultimately didn't fund the deal. The sale is still the biggest completed M&A deal in Asia outside Japan so far this year, according to Dealogic.

Charoen Pokphand last week said it had nothing new to add. A Ping An spokesman said last week he didn't have anything to say beyond a filing announcing the sale's completion in February.

Just weeks after HSBC disclosed that CDB was Mr. Dhanin's banker for the deal, the policy bank replaced Liu Hao, the head of CDB's Hong Kong branch, with Han Baoxing, a senior official in CDB's treasury and financial-markets operations. Mr. Han declined to comment last week. Mr. Liu couldn't be reached for comment. UBS AG ended up funding Mr. Dhanin's purchase, people familiar with the matter said earlier.

Since the switch, CDB, which had set up its Hong Kong branch in 2008 as a base from which to expand outside China, hasn't been funding high-profile acquisition deals.

CDB wasn't a lender on the US$4.7 billion deal to sell AIG's aircraft-leasing arm, International Lease Finance Corp., to a Chinese consortium—a deal that now looks near collapse. When the Chinese group was raising financing to buy ILFC, it approached the Hong Kong branch of CDB in the first quarter of this year, according to people familiar with the situation. But CDB didn't end up lending to the consortium, which fell apart and is now left with one buyer, Hong Kong private-equity firm P3 Investments. P3 continues to look for financing, and AIG has said it might list ILFC should the Chinese purchase collapse.

In May, as Alibaba tapped banks for an $8 billion loan, of which $2 billion was a refinancing of the CDB loans from last year, the Chinese policy lender didn't take part. Instead, 22 banks participated in the loan, of which the only Chinese bank was
Bank of China
Ltd.
's Macau branch.

That absence was unusual because banks tend to be involved in the refinancing of their loans, to keep interest payments coming in from clients they already have a relationship with.

Also, CDB hasn't taken part in what is China's biggest-ever purchase of a U.S. company, the $7.1 billion acquisition by Chinese pork producer Shuanghui International Holdings Ltd. of Smithfield Foods Inc. The acquisition by Shuanghui is being funded by Morgan Stanley and the New York branch of Bank of China Ltd. CDB didn't join in the first stage of syndication of the deal, when Bank of China brought in other banks to participate its US$4 billion term loan to Shuanghui. Two people familiar with the situation said CDB might still come in when BOC sells on its loans in a second stage of the syndication process, but the Chinese policy lender's role would be small.

To be sure, CDB hasn't retreated completely outside China, though most of the big loans it has made are firmly state focused. It provided in April a €400 million ($542 million) refinancing loan to Portugal's power and gas operator, REN-Redes Energeticas Nacionais SA, after China's State Grid Corp. bought a 25% of stake in REN last year.

In February, CDB signed an agreement to provide China National Cereals, Oils & Foodstuffs Corp. with a 30 billion yuan ($4.9 billion) credit facility, safeguarding national food security, according to a CDB news release.

—Warangkana Chomchuen in Bangkok and Fiona Law in Hong Kong contributed to the story.

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